How to Create a Budget

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My life has changed for the better after I created a budget for myself! Before I had a budget, I had no idea how much money I was spending. I was definitely spending too much money on going out to dinner and paying the minimum on my credit cards. I was behind on a couple of bills and not saving enough money.

Everything changed when I finally sat down and looked at my finances. I was tired of being disorganized. I knew I had to make a change or everything would spiral out of control! I gathered all my bills, a copy of my paycheck and a spiral notebook so I could write everything down.

First I made a list of all my fixed monthly bills. This consisted of bills I had to pay every month, like my rent, car insurance and cable bill. These expenses very rarely change and are considered to be “fixed” expenses.

Next I made a list of my monthly expenses that I pay every month, but varies in costs each month. This includes expenses like personal care, household items, pet food and gas. I know I pay for each of these categories each month, but the cost always varies. So how did I figure out how to budget for these items that are always changing in price?

This is where it got a little tricky. I decided to look at my bank account and average out how much money I was spending each month for the 4 past months. I then averaged out the cost.

For example, my household goods really fluctuate because I buy in bulk. I might have a high expense for 1 month, but then almost no expenses for the next two months. By averaging the cost each month, I am still budgeting and planning.

Third, I reviewed my paychecks and wrote down how much money I was bringing home each month after taxes. I consider this to be “fixed” income.

On a side note, my paychecks also list how much money goes towards my health and dental insurance, which I wrote down under my list of expenses.

I also checked my bank account and PayPal account to review all of the side hustle work I had completed. I did a lot of side hustling in 2014! This income is not fixed and varies greatly each month. I consider this to be “extra” income.

I took all of this information and created a monthly budget in a spreadsheet. I have listed out each of my expenses into categories.

Here is a sample budget spreadsheet I have created

As you can see, I created several category headings, including one group called Housing.

In each category, I listed expenses that fall under the category Housing. This includes rent, utilities & garbage, internet & cable and household items into this category.

Next, I took the sum of these categorized expenses and divided it by my monthly income in the yellow rows. This percentage rate determines how much of my salary goes towards housing costs.

I like to do this so I can get an overall look at my expenses and see how much of my money is going towards one category. For example, many people believe housing expenses should be at or under 30%. In the above example, this lists housing costs around 20%. This number is well below the average!

Here is how to make the budget spreadsheet work for you:

List the names of your expenses in Column 1. Feel free to rename each category to what works best for you. You might not need each line in the spreadsheet – it's ok to leave blank!

In Column 3, enter your actual expenses after you have paid each bill.

Once Column 2 and Column 3 is complete, the yellow row will compute how much of your salary goes towards this category. If you have printed this spreadsheet out, simply add the expenses in the category and divide by your total income.

Column 4 lists the difference you have spent between Column 2 and Column 3. This is an important column! This lets you know if you have underspent or overspent in each area.

Are you confused? Don't worry! I have created a budget spreadsheet for you that already has all the math formulas figured out for you that you can use it in Microsoft Excel or Apple Numbers. You can also print out the budget spreadsheet.

Here is what the blank spreadsheet will look like:

I hope this spreadsheet will be beneficial to you! I have filled this spreadsheet out for the next 12 months and it has been very helpful for me. It really has helped break down my expenses and my spending habits!